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Nominet chairman embroiled in governance row

Seat on exec salary committee questioned

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Nominet chairman Bob Gilbert sits on a committee to determine the salaries and bonuses of senior executives, but not his own. Critics say this contravenes the not-for-profit domain registry's corporate governance rules, but Nominet denies any such breach. (Editor's note: Nominet argues that Gilbert is only technically an executive, and has sent an explanatory statement, reproduced in full at the end of this article.)

Gilbert has been a member of Nominet's Renumeration Committee for more than two and a half years. The Committee's terms of reference say: "All members of the Committee shall be non-executive directors who are independent of management and free from any business or other relationship that could interfere with the exercise of their independent judgement."

Gilbert, a former corporate lawyer, has been executive chairman since May 2005.

Nominet's 2007 company report (pdf) confirms that he was a member of the Committee for the periods January to June 2007 and June 2007 to January 2008. Nominet said he was appointed in September 2005 and remains on the Committee today.

People familiar with the ongoing governance turmoil at Nominet say Gilbert's position on the Remuneration Committee was one of the issues that prompted the resignation of non-executive director Angus Hanton last week. In his resignation letter Hanton wrote: "I can no longer share responsibility for what is being done in the company's name."

The same people also say that questions over how executive pay is determined were raised at a board meeting and dismissed. It's understood director concerns over who should determine senior management pay were referred to by Hanton's fellow non-executive director Jim Davies in his open letter to Gilbert of November 7 when he wrote: "You described this being drawn to the board's attention as 'buggering about'."

In 2006 Gilbert was paid £62,000 and £71,000 in 2007. CEO Cowley, the company's other executive director, received £183,000 in 2006 and £194,000 last year. Sources said this year's Renumeration Committee was planning significant increases, that the board was asked to approve. Jim Davies alluded to his opposition to the plans in his letter to Bob Gilbert, it's understood, when he wrote: "Approving the matter concerned is in my view particularly inappropriate in the current economic climate."

There is no question that Gilbert is an executive, rather than non-executive chairman. Article 26 of Nominet's articles of association states: "The board shall consist of two executive directors, of whom one shall be the managing director of the company ... The managing director shall be the chairman of the board."

Gilbert said: "It is absolutely clear why we need the independent governance review. The fact that we are discussing committee membership details in a public forum, rather than within the board, is symptomatic of a much wider problem and one that we have clearly been concerned about for some time. We will not be deterred from this review."

Jim Davies and Angus Hanton declined to comment on this story, both citing fears of legal action. Nominet said on Tuesday it would sue Davies for alleged conflicts of interest over his work as a solicitor for companies related to the domain industry.

Nominet has refused calls for an Emergency General Meeting (EGM). It told members this week: "We have carefully considered such calls for action but, following expressions of support from current directors, former directors, international colleagues and many of our members, have decided not to call an EGM or to offer any resignations." ®

Nominet Statement

Bob Gilbert is one of three members of Nominet's Remuneration Committee. The Terms of Reference for the Remuneration Committee state that members of the committee must be non-executive directors. For the reasons explained below, Bob Gilbert's role within Nominet (e.g. in terms of responsibility, time-commitment) is more aligned to that of a non-executive director and, as a result, Nominet's board of directors (both executive and non-executive) voted to appoint Bob Gilbert to the Remuneration Committee in September 2005. The Terms of Reference envisage that this is a possibility, as they specifically state that, if appointed to the Committee, "the Chairman of the Company shall not be eligible to be appointed as the Chairman of the Committee." The Board of Directors therefore acted entirely properly in appointing Mr Gilbert. Mr Gilbert does not, in any way, have any involvement in setting his own remuneration.

Due to Nominet's constitution, which states that the chairman must also be the managing director, Bob Gilbert is technically an executive director of Nominet. However, in practice, Bob Gilbert is a non-executive director, with the associated time commitments and pay structure. He has no line management or executive responsibility nor any contract of employment.

Because Bob is not an employee of Nominet, he does not and cannot participate in any performance related pay schemes, nor is there any intention to change this. Bob Gilbert's participation in the remuneration committee, which is approved by the board every year, has been public since his appointment to the committee, is included in company accounts and is outlined in his service agreement as a possible requirement. The board was fully aware of Bob's technical 'executive' position on his appointment in 2005. Until now, there have been no objections made to his appointment by any members or board colleagues.

Bob Gilbert was appointed to Nominet and the remuneration committee on the strength of his governance expertise and extensive board experience. In March 2006, Nominet, led by Bob, proposed changes to the constitution, including removal of the requirement for the chairman to be defined as an executive position. Nominet's membership rejected this proposal.

At this time, Bob Gilbert will remain on the remuneration committee. The structure of the committee and the executive/non-executive roles will be reviewed as part of the governance review and recommendations will be considered once the review is complete.

An independent reviewer will be announced next week to examine Nominet's corporate structures in response to scrutiny from the government.

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